The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

By Sebastian Pellejero

NEW YORK, June 17 (Reuters Breakingviews) - Punishingly high housing costs are the universal malady of powerhouse cities. New York’s case is particularly acute. On the campaign trail, Mayor Zohran Mamdani roused supporters with a promise to freeze rents on regulated apartments. Now, he has unveiled a $22 billion plan promising to build 200,000 new affordable units and preserve as many again over a decade. Speedier permitting, a building code rewrite and an insurance pool for distressed owners round out the package. It’s an extraordinarily ambitious plan, one that addresses anxieties shared by many urban peers. It’s also not enough.

With average rent in New York’s main borough of Manhattan costing more than $5,000 a month and the city’s rental vacancy rate hovering near half-century lows, the squeeze is on. Housing costs have grown more quickly than paychecks since the 2008 financial crisis, according to data from NYU’s Furman Center. The problem will sound familiar from London to San Francisco. Not one of the 95 major markets across multiple countries tracked by Chapman University qualified as affordable last year, with the median home costing more than five times the median income.

Mayors face an ugly mismatch between supply and demand. Already home to nearly half of the world's people, cities will account for two-thirds of global population growth between now and 2050, the United Nations reckons. Strict development rules and affordability have hollowed out desired stock: vacancy rates in large metropolitan areas, including Berlin and Sydney, are now well beneath the 5% threshold that New York officials classify as an emergency.

Previous mayors have tried to increase production, and rental unit construction is indeed rising in the Big Apple. Nearly 19,000 were added in 2025, as counted by ubiquitous local listings service StreetEasy, less than 1% of the city's total rental units. Surveying various studies, the Mercatus Center estimates that it would take expansion of 2% just to reduce rents by 3% versus current trends. The figures imply 75,000 units per year just to deliver a modest adjustment.

City Hall won't reach that threshold even if private supply keeps up. Add Mamdani’s housing plan target to new rentals coming to market, and the combined figure hits only half that mark before demolitions, delays and churn are accounted for.

New York’s inclusionary zoning mandates, which Mamdani’s plan would expand, compound the gap. Requiring a fixed share of new construction to be income-restricted forces developers to subsidize the difference. Existing limits on rent increases for such units over time may begin to fall behind operating costs, ultimately delaying needed renovations. As of April 2025, some 57,000 rent-stabilized units sat vacant, according to state housing data, or 6% of the city's regulated stock.

There’s a more pernicious undercurrent in the fight against crushing rents. Cooling the market ultimately means containing home prices. Yet municipal budgets from New York to Toronto, and much of the middle class’s wealth, rest on the belief that values only go up. A deluge of new supply can break that assumption. In Austin, where construction has surged, rents are down 15% from their peak and home values dropped more than 5% over the past year, per Zillow. Property tax collections are forecast to rise roughly 17% this fiscal year, according to budget estimates, thanks to new construction and rate increases.

Here, Mamdani can learn from some global peers. In Tokyo, a more permissive national zoning framework and standardized designs help projects skip local vetoes that bog down development elsewhere. Perhaps unsurprisingly, Japan's capital is less reliant on property-related taxes, which made up nearly a quarter of overall revenue last year, compared to 43% in New York.

It’s worth making such a shift. If housing costs ease, it should free up consumer wallets to spend on local businesses and consumption. Making city living more affordable could deepen the supply of labor, ultimately supporting payroll-based tax collection. New York added 895,000 jobs from 2011 to 2023, but just 353,000 housing units. More broadly, GDP per capita appears to rise with population density.

To align politics with ideal policy, New York could decouple tenant assistance from housing production. Fewer than half of the city's Section 8 recipients find a home before their vouchers expire, partly because rent caps fall below market prices, forcing local authorities to find other solutions. A resurgence of market-rate housing would make this subsidy more effective by expanding affordable options across the rental ladder.

Reshaping the tax code to incentivize higher-density residences, like apartments, and to rely less on property levies overall would set the stage for a building boom across all five New York boroughs, and prevent it from perversely harming city coffers. Gotham's apartment buildings have the highest tax disparity compared with owner-occupied residences among all U.S. cities, despite renters occupying nearly two-thirds of units.

Without a major shakeup, New York’s various housing plans may simply remain too marginal to move the needle. International hubs thrive on proximity: of people, of ideas, of capital. Housing scarcity turns that advantage into a toll on workers. Mamdani may slow the growth of that toll, but reversing it requires much more.

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